{"id":65435,"date":"2023-09-26T00:33:32","date_gmt":"2023-09-26T04:33:32","guid":{"rendered":"https:\/\/ifintechworld.com\/news\/keycorp-stock-good-bank-and-respectable-yield-at-adequate-price-nysekey\/"},"modified":"2023-09-26T00:33:38","modified_gmt":"2023-09-26T04:33:38","slug":"keycorp-stock-good-bank-and-respectable-yield-at-adequate-price-nysekey","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=65435","title":{"rendered":"KeyCorp Stock: Good Bank, And Respectable Yield At Adequate Price (NYSE:KEY)"},"content":{"rendered":"
\n
<\/picture>
<\/figcaption><\/figure>\n

Thesis<\/strong><\/h2>\n

KeyCorp (NYSE:KEY<\/span>) is a pillar of the Midwest economy with its vast network. The banks have 972 retail branches and close to 1,300 ATMs in 15 states. The impending commercial real estate crisis poses a severe risk and highlights the precarious balance between economic stability and rate adjustments. Its <\/span>credit rating downgrade does not help either. However, downgrades and the stock’s undervaluation reflect the worries of the larger market.<\/span><\/p>\n

Despite all difficulties, KEY offers a high-quality balance sheet with lower exposure to risky assets such as CRE and leveraged financing. Another advantage is a higher percentage of short-term debt instruments, thus exploiting the inverted yield curve. Last quarter, banks’ performance suffered, but I expect to improve its profit margins in the long term. The stable noninterest income is one of the reasons to think so.<\/p>\n

KEY offers a tiny margin of safety calculated with the Dividend Discount Model; however, it is cheaper than its peers measured with a price-to-book and price-to-sales. Given all the facts, my verdict for KEY is a buy rating.<\/span><\/p>\n

Bank financials<\/strong><\/h2>\n

KEY has an adequate balance sheet composition, given the troubled banking system. The table below shows the metrics I use to assess banks’ solvency and liquidity. The data is taken for the last financial statement.<\/p>\n

<\/span><\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
\n

Asset ratios: assets structure <\/strong><\/p>\n<\/td>\n

 <\/td>\n<\/tr>\n
\n

Cash\/Total Assets<\/p>\n<\/td>\n

\n

3.8%<\/p>\n<\/td>\n<\/tr>\n

\n

Loans (total) \/Total Assets<\/p>\n<\/td>\n

\n

61%<\/p>\n<\/td>\n<\/tr>\n

\n

C&I Loans\/Total Assets<\/p>\n<\/td>\n

\n

31.2%<\/p>\n<\/td>\n<\/tr>\n

\n

CRE Loans\/Total Assets<\/p>\n<\/td>\n

\n

13.3%<\/p>\n<\/td>\n<\/tr>\n

\n

Mortgages\/Total Assets<\/p>\n<\/td>\n

\n

11.2%<\/p>\n<\/td>\n<\/tr>\n

\n

Securities HTM\/Total Assets<\/p>\n<\/td>\n

\n

4.8%<\/p>\n<\/td>\n<\/tr>\n

\n

Securities AFS\/Total Assets<\/p>\n<\/td>\n

\n

20.0%<\/p>\n<\/td>\n<\/tr>\n

<\/td>\n <\/td>\n<\/tr>\n
\n

Liability ratios: capital structure <\/strong><\/p>\n<\/td>\n

 <\/td>\n<\/tr>\n
\n

Deposits (total)\/ Total Liabilities<\/p>\n<\/td>\n

\n

80%<\/p>\n<\/td>\n<\/tr>\n

\n

NIB deposits \/Total Deposits<\/p>\n<\/td>\n

\n

24%<\/p>\n<\/td>\n<\/tr>\n

\n

IB deposits\/Total Deposits<\/p>\n<\/td>\n

\n

76%<\/p>\n<\/td>\n<\/tr>\n

\n

Long-term debt\/ Total Liabilities<\/p>\n<\/td>\n

\n

12.2%<\/p>\n<\/td>\n<\/tr>\n

\n

Company notes\/ Total Liabilities<\/p>\n<\/td>\n

\n

4.4%<\/p>\n<\/td>\n<\/tr>\n

\n

Equity\/ Total Liabilities + Equity<\/p>\n<\/td>\n

\n

7.7%<\/p>\n<\/td>\n<\/tr>\n

<\/td>\n <\/td>\n<\/tr>\n
\n

Solvency ratios:<\/strong><\/p>\n<\/td>\n

 <\/td>\n<\/tr>\n
\n

Loans \/Deposits<\/p>\n<\/td>\n

\n

82%<\/p>\n<\/td>\n<\/tr>\n

\n

Cash\/Deposits<\/p>\n<\/td>\n

\n

5.2%<\/p>\n<\/td>\n<\/tr>\n

\n

Borrowings (inc. bonds)\/ Total Assets<\/p>\n<\/td>\n

\n

15.3%<\/p>\n<\/td>\n<\/tr>\n<\/table>\n

<\/span><\/span>